Nigeria’s power generation companies have opposed the Enugu Electricity Regulatory Commission’s planned cut of Band A electricity tariffs, warning that the decision relies on questionable subsidy assumptions and poses serious risks to the country’s fragile power sector.
In a statement issued on Monday by the Chief Executive Officer of the Association of Power Generation Companies, Joy Ogaji, the GenCos stated that the tariff revision sets a precedent for all other states and fails to reflect the true cost of electricity generation.
EERC had announced on Sunday that it had reduced the Band A tariff in the state from N209/kWh to N160/kWh, effective August 1, 2025, while keeping tariffs for Bands B, C, D, and E frozen.
The commission issued a new tariff order to MainPower Electricity Distribution Limited, reducing the electricity cost for Band A customers.
According to the commission’s Order No. EERC/2025/003, this move was deemed cost-reflective, insisting that the tariff must reflect the power generation subsidy by the Federal Government for the benefit of electricity consumers.
EERC Chairman, Chijioke Okonkwo, explained that the reduction in tariff became imperative following the commission’s review of MainPower’s tariff and licence applications as the new subsidiary of the Enugu Electricity Distribution Company operating in Enugu State.
“We reviewed their entire costs, using our Tariff Methodology Regulations 2024, and the supporting Distribution Tariff Model to get an average price of N94.
“The price is low because the Federal Government has been subsidising electricity generation cost, which charges only N45 out of the actual cost of N112.
“That was how we came about the average tariff of N94 as a cost-reflective tariff at our level as a subnational electricity market.
“Breaking this across the various tariff bands means that Band A will be paying N160 while other Bands B, C, D, and E are frozen. Band A, at N160, will help MainPower to manage the rate shock, and if the subsidy is removed, the savings will assist them in stabilising the tariff over a defined period of time. Nevertheless, at all times, the tariff will be cost-reflective and will not require any state subsidy,” Okonkwo stated.
But GenCos disagreed, saying that the assumption is deeply flawed and dangerous.
According to Ogaji, the EERC tariff order made it imperative to provide some clarification on the news that the Federal Government had provided a subsidy for electricity.
She stated that there is no government policy on subsidies but debt accumulation, wondering why the Enugu state government is placing more burden on the GenCos, who bear the brunt of unpaid subsidies.
“It is imperative to state that there is no FGN policy on subsidies. It is a debt accumulation,” she stated.
Ogaji warned that the N45 per kWh being covered leaves a 60 per cent cost gap that EERC assumed would be filled by the Federal Government, despite no official or cash-backed subsidies in place.
“This tariff issued by EERC has set a precedent for all other States. From their tariff order, only N45 naira is captured for generation cost out of N112. This portends a bigger issue in the decentralisation of power or electricity to the states.
“There are many burning questions about dealing with obligations and liabilities (all legacy debts post privatisation but before the exit to state independence) in the decentralisation discourse.
“Does this position mean EERC is looking over to the FG to continue subsidising its electricity? How does EERC account for their share of the accumulated sector debt, or are they assuming assets with no liability?
“Should EERC not be designing its tariff to remove its dependency on the FG and make its market attractive for investors?” she queried.
Ogaji recalled that Nigerian power generators are collectively owed over N4tn.
She noted that the Federal Government’s 2025 budget only earmarked N900bn for electricity support, a figure she described as inadequate and unable to cover even half of the sector’s annual generation invoices, which average N250bn monthly.
She regretted that “there are no workable solutions, including cash payments, financial instruments, and debt swaps in sight” at the moment.
“The 2025 government budget allocates only N900bn, raising concerns about its adequacy to cover arrears and future deficits. The power generated by GenCos has continued to be consumed in full without corresponding full payment,” she stated.
Meanwhile, stakeholders have questioned how the Enugu regulator arrived at a subsidy for Band A customers after the Nigerian Electricity Distribution Company removed the same on April 1, 2024.(Punch)
